Systems Thinking

This text is about introducing you to systems thinking. It continues from what you have learned about systems, feedback loops, and interconnections. Please check the previous links if you are not familiar with these themes before reading this text. This text gives you the rude basics of systems thinking.

You live in a complex world with lots of interactions between systems and their elements. It is hard to understand the world without systems thinking. It can be described as a typical mindset. It is used to get a big picture of your systems and how their elements produce different cause-effect relationships. Systems thinking does not work in a way that you focus on one element and forget its effects on others. This latter way of seeing things produces severe misunderstandings about the world. And systems thinking reduces the number of misunderstandings.

The world is full of systems within systems

Your skin is a system within your body which is a system too. You cannot understand your skin without understanding the interconnections between your body and your skin. When you do something to your skin, your brain reacts to your action. If you burn your finger on a stove, your brain sends a signal to remove your finger from the stove. For this to happen, your skin is a receptor of the heat which sends the signal to your brain that it has detected something that is too warm for keeping your finger on it. Without these interconnections, the skin in your finger would burn for a long time on a stove.

Systems thinking helps you to figure out the longer-term effects of the effects of your actions. It does not focus only on here and now the effects of your actions. When you do something without thinking about the longer-term effects, you can have many unintended consequences which you could prepare for, if you had used systems thinking. With systems thinking, you can have higher odds of understanding the future than without it. It also helps you to remove your focus from the causes you cannot change to causes you to have the power to change. This saves you lots of time and effort without having many negative effects. Systems thinking helps also you to make sense of the structure of your systems. It deepens your understanding of them. You can see how different elements in your system interact. When one element changes, others react to this change. Then the whole system behavior will change, at least a bit.

A process with many questions

To understand how your system works, you have to ask many questions. You have to figure out which effects are related to which causes. You cannot understand and/or improve your system without understanding what happens and why. You can also solve problems related to your system with this process. Many of the questions you ask are not related to any special system. They are the same questions, no matter what system is concerned. Problem-solving and system improvement process has three steps:

First, when you start figuring out the effects of one element, you create wider views about the element and the timeframe you focus on. You ask questions about the interactions of many elements and what the future of the system will look like. Questions, like ”How will system elements interact in the future?”, ”If I change one element, how will the other elements behave in the future?”,

Second, you start figuring out how does the system behavior arises and changes. You ask questions like, ”What are the key circumstances and how fast do they change?”, ”In what directions do the key interconnections move?”, ”Do the feedback loops in a system balance or reinforce the interactions of the system?”

The third and final step is all about improving the system. These questions focus on the simple truth that systems are almost always improvable. You can ask questions like: ”Is this system as simple as possible, but not simpler?”, ”Do I need all these elements to get what I want from the system?” or ”Can these elements be improved somehow? The question about the last step is: Does the system improvement produce better results than the time and effort you will put on it? If not, you have to focus on other things.

-TT

Paradox of options

If you go to your local supermarket, you will find too many shelves with too many options. I am almost sure that you have never seen all the products they have in their collection. If you start looking for all the options you have, it is almost impossible to make the optimal choice. Then you will either choose the brand you are familiar with or the product you have always chosen. The odds are in favor of the latter option. During the day, you will have tens of these kinds of decisions to make.

Some freedom is a good thing

Most people think that increasing the number of options is mostly a good thing. The world has changed from life with limited options to unlimited options. This change has a cost. You have limited bandwidth in use in your brains. You will get problems with too many options faster than you think. Your decisions will have three different bad outcomes if you have too many options. They reduce the number of decisions you make, they lower the quality of decisions, and the satisfaction you get from them.

Complexity increases all when you increase the number of options. Some complexity is good, but too many different options bring you analysis paralysis. Each added option multiplies the amount of work and time you use for making a decision. You cannot make any decision after a certain amount of options. What happens is that you use lots of time to make a decision that never materializes. And this time is away from other tasks or decisions. Sometimes not making a decision is a good thing. There are decisions you should not make. If the outcome of not doing the decision is better than the cost of lost time, your outcome becomes better and indecision is a blessing.

Too many options create another unwanted consequence. The quality of your decision becomes lower. Too many options can create a situation where you make a decision that is based on less important parameters. Mating is one of these situations. You might encounter many approachable possible partners in a nightclub. The odds of a decision based on outer appearance grow higher. And the outcome will have less quality. If you are trying to find a partner, you can probably increase your odds by going to a party with a smaller amount of possible partners and make a better decision.

Too many options bring less satisfaction. This is maybe the weirdest negative outcome. Why doesn´t it bring you more satisfaction because you have put more effort into making a decision? One reason for this is that you can imagine that many of your options could have been better than the option you chose. You are more interested in what you could have lost than what you did gain from your decisions. The attractive parameters of other options are more represented in your brains than the attractive parameters of your choice. You will start regretting immediately after the choice you made. These are some of the reasons why fewer options after a certain point mean higher satisfaction.

Sweet spot

Any decision you make has its sweet spot in which there is an optimal amount of options available. In this spot, the number of decisions, quality of them, and the satisfaction you get from being optimal. When you have a single option, you feel disregard for the decision. After you have added enough options, you will arrive at your sweet spot of options. If you will add more options after your sweet spot, each of them is bad for the quality of your decision. You can add options forever, but the result is that the odds of having a good outcome becomes smaller.

Sweet spots differ from decision to decision and from person to person. This makes them hard to find. The process of trial and error will help you find them. This requires situations that repeat each other. The problem with this process is that it consumes time. And your time is limited. You have to make decisions about considering your options. These decisions can be more important than your last choice.

More information about the topic you can find from Barry Schwartz´s book Paradox of choice or his interviews on Youtube.

Until next time,

-TT

Conscious and Unconscious actions

Consciousness is not a simple thing. If you say it is, you probably don´t understand it well. I will not go into detail about consciousness. Before you start reading this text, think about consciousness yourself. Do you think you are always conscious of what you do? Have you ever noticed that you did something without acknowledging it at the moment you did it? Think about more questions about consciousness yourself. Conscious and unconscious actions can be separated into five groups:

1. Always conscious actions
2. Actions that can be done either way
3. Skills that are practiced with conscious actions and become unconscious
4. Actions that can be made conscious but are normally unconscious
5. Actions that are always unconscious

The first group means that you cannot function without conscious thinking. For example, you have forgotten something and you know it. Then you have to put a conscious effort to remember what you have forgotten. This is the most uncommon group of these actions, but people think it is the most common one. Belief in human rationality lies in this misunderstanding.

The second group of actions is skills that can be done either way after once they are well learned. This group of actions does not usually require precise timing or fast execution. Driving is one of these skills. For example, you can take a similar journey from home to work every day without thinking about it consciously during the journey. Sometimes you have to consciously change your journey because of a traffic jam or to stop buying some groceries either in a way back home or to work.

The third group of actions is skilled and initially learned with conscious effort. Usually, this means lots of conscious repetitions. These actions move gradually from conscious to unconscious. The harder these actions get, the more conscious effort you need. Finally, this group of actions becomes automated. After the automatization of the action, conscious actions can fail. For example, if you had watched sports, you might have encountered professional athletes failing in easy situations where they had too much time to perform an easy action. Conscious actions are not as effective in those situations than unconscious actions.

The fourth group of actions is normally unconscious. These actions change into consciousness by getting some feedback about their effects. This feedback is usually biological and aims for controlling bodily functions. For example, you can have a sports clock that measures your heartbeats and you can consciously aim for getting your heartbeat higher or lower depending on your needs. You might acknowledge the changes in your bodily functions, but details of how you do it remains unconscious.

The fifth group consists of actions that are always unconscious and mostly spinal reflexes. You cannot intentionally grow your hair or change your blood sugar level. The latter happens at least when you are not consciously eating or you are sleeping. These actions are unconscious. And some survival reflexes are unconscious, too. For example, avoiding a surprising flying object that comes toward you. These actions keep you alive. Therefore, they are necessary. Without these spinal reflexes, mankind wouldn´t exist.

Some actions are performed better with your unconscious mind and some of them are performed better when you put conscious effort. Speed is one variable that separates the need for the unconscious mind and the use of consciousness. As you have noticed, most skilled actions do not require consciousness. When you look at the experts performing their skilled actions, they seem effortless. This is the result of thousands of repetitions done with conscious thought. Expertise is not the most usual way of performing unconscious actions. Habits are the most usual unconscious actions. The quality of your habits is the most useful indicator to see if you will be successful. What this means is that the outcomes of your good habits must be better than the outcomes of your bad habits.

You cannot only perform unconscious actions in life. Big decisions with lots of variables require conscious thought. They require more time. Therefore, if you have no time, you have to rely on your unconscious mind. It is more prone to errors. Separating the unconscious and conscious mind and decisions is not a perfect model. Without the unconscious mind, you wouldn´t make any decisions. You would think about irrelevant things for hours without making any conclusions without it. Therefore, both are very much needed in every decision.

TT

How to predict better?

Everybody makes predictions. Most predictions are irrelevant in the big picture, but everyone makes them. For example, you can predict tomorrow´s weather. Most of the time, it doesn´t matter whether you are right or wrong. But sometimes you have to be outside for the whole tomorrow and then it matters. You make these predictions without a systematic process. You need to have a systematic process to make better predictions. This text is about making them.

Commit to the truth

The first step for making better predictions is to commit to the truth. You have to recognize the influence of your beliefs, and psychological tendencies and you have to question them. You cannot make predictions that confirm your way of seeing the truth when the evidence does not confirm your beliefs or assumptions. You have to be willing to update your beliefs and assumptions when the objective facts tell you different stories than you would like to see. Your beliefs and assumptions have the power to modify your predictions in wrong directions unless you commit to find the truth no matter what that is. Your goal is to make the best prediction you can make with the facts you can gather. If you think you do not have enough facts, you have to commit to finding them. If you have too many facts, you have to commit to separating the relevant facts from noise.

The process of making good predictions

Most people have three different answers to predictions: ”Yes”, ”No”, and ”Maybe.” People who make good predictions live in an uncertain world. In this world, ”Maybe” is the only right answer. This means that you have to make predictions with probability estimates. Your prediction could look like this: ”There is a 70% chance of raining tomorrow.” You also have to second-guess all the people who make vague predictions like ”It may rain tomorrow” or ”The unemployment rate may be less than 5% in the next two years.” You cannot know whether these people have made the right predictions because their predictions can mean anything. If you want to make better predictions, you have to commit to making probability estimations.

The starting point for making a probability estimation is to find a base rate for the thing you are predicting. For example, if you have to predict what is the probability that your football team will win the next home game, you have to start by looking at how many wins they have won in their home games this season. Your sample size should be enough. If the season has just started, you have to look for last season´s statistics, too. Let´s say they won 7 out of their last 10 home games, then the base rate is 70%. This is your starting point. Then you have to use other data to adjust your probability estimate. Why should you start with a base rate? Because your first estimation is just your hunch and the probability of it being right is smaller than using the base rate. The figure you find first will be the most available for your brains. It will be your anchor during your prediction process. Do not forget to define the time frame for your prediction if necessary.

After you have figured out the base rate, you can start forming your view. Break your question to smaller questions like ”What would have to be true for this not to happen?”, ”What kind of information helps me to answer this question?” or ”What I do not know about this question?” You have to figure out what you don´t know and what you do know. After many questions, you should make your probability estimate and write it down and the reasons behind it.

Then, it is time to find out some outsider view about the same question. Consult people who have made predictions about the same question. Find out what the experts think and their reasons. Focus on the differences in reasons between your view and other people. Consult prediction markets, like stock markets, or betting offices that give odds to a thing you predict. You can use polls if you predict the elections, etc. After you have found out the base rate, made your probability estimate, and found out about the outside views, you have to synthesize and make another probability estimate.

Let the time pass and then you can scrutinize your own prediction and make another estimation. You can do it by assuming your first estimate is wrong. Consider why it is wrong and write down the second estimate and reasons for it. And then find out about other outside views again. Then, synthesize again and update your prediction when new important information arrives. This process ends when the time frame closes. This process can feel frustrating. If you want to predict better, you have to update your estimates often and make gradual adjustments to your predictions.

Prepare to be wrong. Even the best predicting professionals are occasionally wrong. Do not mix up the outcome of the prediction and the quality of the process. When you have 80/20 predictions, you are rt only 4 out of 5 predictions when your probability estimates have good accuracy. No matter whether you are right or wrong, have a postmortem. Think about the process and the reasons behind your estimate. Did your process have high quality? Did you find out the right base rate? Did you update your estimate often enough? Did you find out the outside views of the best professionals and prediction markets? How many times you synthesized these views? All these questions help you to predict better next time.

Sources:

Superforecasting, Philip Tetlock

The Signal and the Noise, Nate Silver

-TT

About me

Before I start with the introduction, I would like to tell you that I will get back to publishing texts next week. This text is about introducing myself to the readers.

I am Tommi Taavila. I am an independent thinker, a lifelong learner, A son, a brother, an author, and Finnish. I stumbled upon the latticework of mental models by accident. I was searching for answers about what makes the best investors better than others about five years ago and I found Poor Charlie´s Almanack and Charlie Munger´s latticework of mental models system. I realized that it is not only good for investing, but it is probably the best way of understanding the world. When I learned more, I figured out that everybody has their mental models and latticeworks. Most people just haven´t registered that the way they think and act is through their mental models. The quality of the models and latticeworks people have could be much better.

What are my qualifications?

I have no diploma for creating a latticework of mental models. Nobody does. You can have a few diplomas in a few disciplines. But you cannot have diplomas for all the most important disciplines. And you do not need to have them. You just have to understand the big ideas of the most important disciplines and how they intertwine. The former is easy, but the latter is hard. You can learn all the big ideas in all the most important scientific disciplines in a few thousand hours or even less if you know what they are before you start learning. I have monitored my hours for the last two years and I have spent about 2,000 hours learning the models better. This is the best-measured qualification I have for understanding the models. These 2,000 hours consist of reading, writing, and taking notes. These hours measure the direct work about the models in the last two years. Then there are the things I learned before doing this systematic work for finding out and understanding the models in the last two years.

Then, there come the qualifications for understanding how these models intertwine which is much harder. It is more about thinking habits. You have to like thinking. You have to have intellectual curiosity and stretch your mental muscles in multiple directions and want to do it. You need to have a talent in seeing the connections between two completely different phenomena. You have to be able to find real causes behind events. You have to be able to see that some events are just higher-order effects from underlying causes, not events that are caused by the most obvious explanations. Most people do not have all these intellectual traits.

Then there are the traits you can´t have. You cannot suffer from any strong ideologies. For example, you cannot think that capitalism gives you all the answers and socialism is a completely bad ideology. You have to think that both of them have their bad and good characteristics. You can´t have an IQ that is too low. A little bit better than average is enough. You cannot believe that all the answers to the problems of your discipline can be found from the big ideas of your discipline. For example, economics without understanding psychology is pretty much useless. And still, most economists ignore psychology by focusing on the myth of economically rational humans.

A fair warning. I am 80 percent sure I have all the mentioned intellectual traits for doing this. Nobody can be 100 percent sure of most things. If they are, they do not understand the world. My biggest obstacle for doing this is an excessive self-regard. I have a big ego and I have put much effort into doing this. The latter increases the former. I am not always right and I don´t always think I am right. My probability estimate can be wrong too. You have to decide whether it is close to the truth or not. If you repeatedly read my texts, you have probably made some kind of estimation already.

Other information

I am sure you have noticed that my English is far from perfect. I hope you can still understand my texts. I have no business around mental models. I plan to publish three books in the next ten years. The first one will probably be published before the end of 2020. Selling books can make some money, but I doubt it will be enough to compensate for the time I will use for my texts and books. Most of the information in the books is published on this website. You don´t have to buy books to get information. The differences between those books and the information on this website are that books have better edited and more coherent content. I am an independent thinker. I have no research grants, no foreman, no relationships with my sources, and no sponsors to produce this content. I prefer it that way because the only person who can distort my content is me. I also write for a financial online publication Piksu.net and have published three books in Finnish.

Until next week!

-TT

Your mental models tell you what to think and how to act

All of your thoughts and actions are the results of your mental models

You can´t function without mental models. When you start growing as a child, you do not have many models. The amount of them starts to grow. And finally, you have hundreds or even thousands of mental models as an adult. Your thinking becomes more complex and you see the world differently compared to your childhood. Your models are always updated. Most of your mental models affect your unconscious mind. This is why most people cannot figure out that all of their physical actions are based on their mental models too. If you want to throw a ball, your brain needs to have a chain of mental models to move all the necessary parts of your body to achieve your goal of throwing the ball.

Your view of the world is based on your mental models

You have your view of the world. This view is your latticework of mental models of the world. It consists of your mental models that are the results of your learned facts, previous stimuli, experiences, and current situation. Your response to different stimuli produces different actions or thoughts. They are both context-dependent. It means that your responses vary depending on the current stimuli and previous choices and experiences. For example, if you have made a decision month ago, it could be different today in the same stimuli and in the same location because you have had different experiences between these two decisions. There is a possibility that your mental models today are different than a month ago. There might be only a slight change or a big one.

Your view of the world is never complete

Your view of the world is imperfect. You cannot have a complete picture of the world, because it is too complicated. You can have a close to perfect view of your surroundings if you are isolated, but the world out there is always incomplete. You have at least hundreds of different mental models in your head. You might not describe them as models but they are models in their imperfect sense. Some models are closer to the truth than others. Different people have different models that are closer to reality than other people. For example, my mental model about the latticework of mental models is closer to reality than yours and your mental model about how well I can write is probably closer to the truth than mine because I suffer more from overblown ego than you do.

Your life is a result of your mental models and randomness

You can have close to perfect mental models and the result of your life can be an absolute tragedy. Your outcomes always have an element of randomness. Your life can end by standing in the wrong place at the wrong time. For example, you can do everything right and meet a stranger accidentally that is a terrorist or another kind of nutcase and he will shoot you to death. Some randomness can always change your life completely. I am not saying that it is the most likely outcome, but it can happen. You can only raise your odds to get the outcomes you want. Nothing is ever certain. You have to always think about the odds that your mental models are the best possible ones in the context you are using them. And you have to remember that your odds are never a hundred percent. The best odds of being right you get from the best principles of the most important intellectual disciplines like physics, biology, mathematics, etc. These models are universal and withstood the test of time even though they have been proven right only in the last centuries. If you need to improve your models and you probably do, these models should be first in your list. Most of them you can find here.

This is all for a while. I wish you a great summer. I will back at some point in time.

-TT

Are emotions simulations?

The title has a question mark because scientists are not unanimous about what emotions really are. This text is based on the assumption that a theory of constructed emotion is right. A classical view says that emotions are constant biological components that have grown in millennia and they have been developed by the survival instincts needed a long time ago. A theory of constructed emotion sees things differently. It sees emotions as learned and created social agreements based on your experiences, immediate stimuli, and culture. This theory makes you more responsible for your own behavior.

Neurons and emotions

A classical view talks about emotion fingerprints. According to it, you have the same facial and bodily expressions about emotions. This means that your muscle movement tells others everything they need to know about your emotions. A theory of constructed emotion disagrees with a classical view about this. According to it, emotions don´t have any physical fingerprints. For example, anger doesn´t look the same in the facial muscles all the time. The classical view believes that the same neurons and their synapses in the brain create the same facial expressions that express anger or other emotions. According to a new theory, different neurons and their synapses can create the same emotions, and varying facial movements can express the same emotions like anger in different contexts after different experiences and social agreements. Different neurons have different purposes according to this new theory.

Context, experiences, and social agreements

According to this new theory, your immediate surroundings, previous agreements, and social agreements construct emotions together. Your emotions depend on your environment. You can show your anger or feel it differently depending on where you are. You can express your anger differently at home and at work. Emotional expressions are tied to specific environments. You can express your anger to someone else differently depending on your immediate surroundings. Another person can show their anger to you differently at home than at your office. You give different meanings to different occurrences based on your previous experiences. When you have experienced anger on the bus, you can expect that you will experience it again on the same bus, even though your other surroundings are different. Different cultures can have different expressions for different emotions. For example, Asians have different facial expressions of anger than people who live in Western countries. They have learned to express their emotions differently. One of the most important things to understand is that people construct their emotions differently and it is very hard to know what others are feeling all the time.

Simulations

All your senses provide you with stimuli all the time. Your brain uses your past and present stimuli and compares them to construct simulations. Then your brain chooses stimuli that are relevant to your current situation and throws other stimuli away. Your senses do not provide reactions, they provide simulations based on current stimuli through your senses and some previous simulations that have created different neural patterns in your brain. Then it chooses the most probable simulation that is the sensory input you react to. It adjusts you to the current situation. The primary tools for your brain to understand current situations are your previous experiences. Cultural differences are based on different previous experiences. And these culture-dependent experiences have created different social agreements based on different cultures.

Your simulations are your neural patterns. They guide your actions and produce meaning for the stimuli you experience through your senses. When your neural patterns describe emotion simulations, your brain constructs emotions. Your brain actively constructs emotions based on your sensory inputs. It doesn´t just react to inputs. Without previous experiences and simulations based on them, you couldn´t make any sense from your current sensory inputs. They would just be meaningless noise. Sometimes your sensory inputs help you to have a meaning for your current stimuli and your brain constructs an emotion. Sometimes it does something else like produce an action.

This is an interesting theory. It makes sense, but I have no idea if it is a fact or not. If you are interested in learning more, you can read Lisa Feldmann Barrett´s book: How Emotions Are Made or watch her TED talk about the theory.

Until next time,

TT